IT’S A DONE DEAL FOR INSURANCE BILL, FINALLY

US indices surged 0.9%-1.5% yesterday, with the Dow and S & P 500 turning positive for the year, on the back of a weaker dollar and as mixed economic data tapered expectations that the Federal Reserve will hike rates mid-year.

Retail sales for February fell 0.6%, missing expectations of a slight gain. Weekly jobless claims fell more than expected to 289,000, below the prior week’s 320,000.

Import prices for February rose 0.4%, versus a revised decline of 3.1% in January. Export prices declined 0.1%, less than January’s decline of 1.9%.

Dollar index fell about half a percent, pausing its recent rally. The euro edged higher to $1.06, up from 12-year lows hit yesterday.

After a gap up opening, benchmark indices added some more gains through the session to end higher by about nine tenth of a percent, breaking 3-day losing streak. Sensex gained 271 points to settle at 28930 while Nifty finished at 8776, up 76 points. BSE mid-cap and small-cap indices gained 1.2% and 0.9% respectively. All the BSE sectoral indices ended in green with Power and Consumer Durable indices leading the tally, putting on 2.3% and 1.5% respectively.

In a major boost to the government’s reform agenda, the Rajya Sabha yesterday gave the go-ahead to the insurance bill, raising the ceiling for foreign investment in insurance companies to 49% from 26%. The move to increase the foreign investment cap in insurance companies will kick-start the industry, which has been struggling for lack of capital. It would also boost infrastructure funding since only an insurance corpus can fund long-gestation public works projects.

February Consumer Price Index (CPI) rose to 5.37% Vs 5.11% in January mainly due to a spike in food inflation. IIP for January came in at 2.6%, much higher than the estimated 0.47% and better than 1.7% in December.

OUTLOOK

Today morning Nikkei is up more than a percent, crossing the 19000 mark and touching a fresh 15-year high. Other Asian markets are trading with gains in the vicinity of half a percent and SGX Nifty is suggesting about 55 points higher opening for our market.

After Nifty nearly achieved the downside target of 8670 on Tuesday, we had advised booking profit in short positions and remain on sideline till downside support placed at 8670 or the immediate resistance placed at 8850 are crossed.

After today’s gap up opening, benchmark will be closer to the 8850 resistance, a sustained trading above which would generate a buy on the hourly chart and open up the space for the further upside till about 8950.